Cablers limp to NCTA

Stox cloud hangs over confab

Worries over rising interest rates and a recent court setback have sent cable stocks down an average of 21% in the past few weeks, ensuring a somber mood for execs gathering in Chicago today for the National Cable Television Assn. annual meeting.

“The mood on cable stocks has really gotten a lot more depressed in the last four to six weeks,” said Lehman Bros. analyst Larry Petrella.

On Friday alone, cable stocks fell as much as 5%, with Comcast dropping $2.06 to $32.81, Cablevision Systems closing down $1.87 to $66, Cox Communications falling $1.18 to $35 and Time Warner closing down 87¢ to $64.31.

Part of the stock slump is due to the federal court ruling in Oregon earlier this month that No. 1 cabler AT&T must open up its cable plant for use by rival Internet providers, such as America Online. AOL competes with AT&T-controlled @Home Corp.

That court ruling, hotly contested by major cablers, will likely be the key topic of discussion this week for the 30,000 people expected at NCTA, say Wall Street analysts.

About control

Cablers feel their multibillion-dollar investment in upgrading their plants to allow for high-speed Internet use, as well as other services like telephony and digital cable, should allow them to control access to their systems.

Analysts worry that the ruling, if not overturned, could cause cablers to scale back investment in plant upgrades.

“Cable is going to threaten (that) they won’t invest and you will have less competition” in areas like telephone service, Petrella said.

This worry, combined with the escalation of interest rates in recent days, has sent cable stocks tumbling from their recent sky-high valuations. Cablers are sensitive to higher interest rates because they usually carry plenty of debt.

This week’s NCTA meeting will likely also focus on the progress of the rollout of new services such as cable modems for high-speed Internet access, digital cable and telephony, Petrella said.

A key issue for programmers is how quickly digital cable will be introduced across the country, because most new cable channels are destined for digital tiers. Any slowdown in investment spending, delaying the onset of digital, could push back the launch date for new channels, analysts warn.

Satellite competish

Still, some observers are skeptical that cablers will delay their investment spending, given growing competition from satellite TV and telcos. And many of the major cablers are so far advanced with their plant upgrades that delays would make little sense, one analyst said.

Darice Grippo, president of money managers GRI Cos., expects AT&T and AOL to come to some agreement “behind the scenes” to defuse the situation.

“Frankly, I think the cable industry would be well served if it could market (its Internet offerings) off an entrenched consumer base such as AOL,” Grippo said.